Brazil manufacturing activity picks up in August -PMI

Reuters Staff

2 Min Read

SAO PAULO, Sept 1 (Reuters) - Growth in Brazil’s manufacturing sector accelerated to a three-month high in August on the heels of strong local and foreign demand, a private survey released on Friday showed, suggesting an economic recovery may be gaining speed.

The Purchasing Managers’ Index compiled by research firm Markit rose to a seasonally adjusted 50.9 in August from 50.0 in July. Readings above the 50 threshold indicate improving business conditions for manufacturers.

Companies ramped up output for a sixth straight month, thanks to a pickup in domestic demand and strong export orders driven by a favorable exchange rate. Efforts to reduce costs led many manufacturers to cut payroll jobs, but the pace of firings was the lowest in three months.

The report is the latest in a string of solid data highlighting growing momentum in Latin America’s largest economy as it exits its deepest recession in more than a century.

The central bank has cut the benchmark Selic interest rate aggressively to protect the fragile recovery, with 12-month inflation at its lowest in eighteen years. Still, the PMI report showed input costs rising due to higher prices for energy, fuel and metals.

“While the central bank hinted in its latest policy decision that the accommodative policy stance is likely to continue in coming months, recent developments in inflation may mean smaller cuts to the Selic as we head towards the year-end,” Markit economist Pollyanna De Lima said.

The Brazilian economy is expected to grow just 0.4 percent this year after contracting 8 percent over the prior two years. (Reporting by Bruno Federowski; Editing by Richard Chang)